The privatisation that never was

On the face of it, the Railways Act has been a great success. The railways are booming with record numbers of passengers, a massive investment programme and an excellent recent safety performance. However, it is over the question of whether there is any causal relationship between privatisation and the boom in passenger numbers that the argument still rages. In what way has private sector involvement contibuted to this success story.

There is a fantastic irony about the current situation of the railways. Although they were nominally privatised by the 1993 legislation, the most fundamental failure of the Act was over the issue of getting government out of the railways. That was one of the stated aims of the ministers who pushed through the privatisation at a breakneck pace during the 1992 – 1997 Major administration but it has never been realised.

The railways, in fact, are still very much under state control. That’s not just because they require a massive subsidy – currently running at around £4bn, around double the cost of what British Rail received annually if inflation is taken into account – but also because they are such a key part of the nation’s infrastructure that ministers do not dare letting go. In virtually every significant aspect of the railways, there is the Department for Transport and its ministers hovering over any major decisions whether it is on fares rises, station investment, rolling stock procurement, ticket office opening hours, the timetable and so on. Virtually all the investment in the railway is paid for or supported by taxpayers.

The railways therefore, have not really been privatised. Indeed, the one part that was sold off to the public Railtrack – which owned the infrastructure and all the stations – flourished briefly and then collapsed because of the internal contradictions. The private sector, and the sharheholders in particular, could not bear the risk of being responsible for the upkeep, maintenance and renewal of the basic infrastructure of the railways. Following the Hatfield train crash and the fiasco over the renewal of the West Coast Main Line, Railtrack became Network Rail which all but the most ideological of supporters of privatisation recognise is in fact publicly owned gien that its £30bn debt – soon to be £50bn – is guaranteed by the state. Moreover, Network Rail then took in house the maintenance teams that had been privatised, bringing a large chunk of the railway industry under effective state control.

The train operators, too, are protected from bearing much of the risk of running a railway company. Under the current franchising arrangements, most have a cap and collar arrangement which effectively means that the risk of major losses or indeed excess profits. While the trains are owned by the three rolling stock companies created at privatisation, any decisions over the purchase of new stock or even the redeployment of older stock is made by civil servants and ministers, not the private owners.

As one railway manager who used to work for British Rail and then spent 20 year with a private operator, never tires of telling me ‘ the Department has far more involvement in the day to day running of the railways than it ever did in the days of BR. We have far less freedom to make key decisions than we did then’. Therefore if the Railways Act was an attempt to privatise railways, if was undoubtedly a failure.



  • The Pensioner

    Your penultimate paragraph could have gone on to point out that even the financial risk the ROSCO’s face on new trains is backed off to Government via the Section 54 agreements.

  • Mike

    Railtrack was deliberately sabotaged by the former Labour government as part of their anti-privatisation doctrine.

  • Dan

    Thanks Mike – a real insight – no issue with a wider perception that they were responsible for crashes through poor asset management , and a variety of liabilities that would have meant that dividend payments might have shrunk to nothing and shareholders left with worthless paper?

    Never mind that there income presumably come from track access charges which in the case of the passenger trains were underwritten by govt though the franchise agreements (most of which in the Railtrack years were subsidized)

    And, I nearly forgot, they were in charge of the WCML modernization that went several billions over budget. They promised speeds to Virgin that they could not and never have been delivered, which meant virgin got compo – but not from them or their shareholder, from the taxpayer….

    Given how rt wing the last Labour govt was I can bet that the last thing Blair and Brown wanted to do was re-nationailise anything…..

  • RapidAssistant

    Maybe “privatisation” was the wrong word – “restructuring” was probably more apt!

  • RapidAssistant

    Publicly owned assets were cast to the wind by the Conservative government that went before it Mike, into the hands of businessmen who knew a lot about sweating the assets to destruction and nothing about running a railway. New Labour “anti-privatisation”??? hmmm I seem to remember Tony Blair doing away with Clause 4 whilst Railtrack was being conceived…….

    Do I detect a disgruntled and embittered Railtrack shareholder in our midst?? If so I have zero sympathy for you.

  • Greg Tingey

    And now …..
    Network Rail is to be re-nationalised from late 2014.
    They are not calling it that, of course ….